Vail Resorts to purchase Crested Butte

A client told me recently…”the only constant is change”, that certainly rings true this week for Crested Butte. Below is a great article from the Crested Butte News with some insight on the pending sale.

by Mark Reaman

To paraphrase an old CBMR marketing campaign—“We are not Vail.” But Vail will likely be running the ski mountain this winter. In an announcement that sent shock waves through the community Monday morning, it was revealed that one of the world’s largest ski resort operators, Vail Resorts, is under contract to purchase family-owned Crested Butte Mountain Resort. The deal is expected to close later this summer.

Current CBMR operators, the Mueller family, who came to Crested Butte 14 years ago, confirmed that they agreed to a sale of all three ski resorts they manage under Triple Peaks LLC, including Crested Butte Mountain Resort, Okemo in Vermont and Sunapee in New Hampshire.

Vail Resorts executive vice president of the mountain division Chris Jarnot told the Crested Butte NewsTuesday that the company is excited to bring CBMR into its portfolio but has no desire to change the community or culture of Crested Butte.

Vail will pay $82 million for Triple Peaks and the leases currently held by a hedge fund will be paid off at closing. The Muellers will retain a chunk of the local real estate holdings including the Prospect property on the back of the mountain; the North Village property at the base of Snodgrass; the commercial property in the Lodge at Mountaineer Square; and the Treasury Center building in the base area.

Vail will take over the Grand Lodge commercial property, the main parking lot and the land behind the Grand Lodge. The property where the Adventure Park and mini-golf is located will go to Vail Resorts at closing.

“We are no longer in the real estate development business,” explained Jarnot. “When it came to the real estate aspect of the Crested Butte equation, we acquired what we need to help operate the mountain and let the Muellers retain the other real estate. We were focused on the real estate we need to operate the mountain.”

Tough call, staffing

Ethan and Erica Mueller both said Monday that the decision to sell was extremely difficult for the family, especially given the recent financial successes the Triple Peaks resorts have seen the last several winters. But they basically said the writing was on the wall in terms of how the ski resort industry was evolving with Vail and Alterra (Aspen) basically controlling resorts across North America and the world and marketing their brands to skiers through ways smaller resorts had trouble competing with.

“There were times during these discussions that it was a shock for us,” admitted Erica. “We would ask ourselves if this was really the conversation we were having. It took a lot of contemplation. It was not easy.”

Ethan agreed. “I’m sure some people look at it and think it was easy and have the attitude of, ‘Look at how many millions they got,’ and I get that to a degree. But this has been our life. It’s always been our plan to take this business into the future. And now everyone is asking what will we do now and frankly, we don’t know. We’ve been focused on the deal and our employees. Obviously, there will be some change. The Vail people indicated that CBMR is structured basically the way it should be structured, so the intent is to keep people,” Ethan continued. “That being said, there are some people who probably won’t be a fit. It was the same way when we came in. As for us—we will be out of a job soon.”

Jarnot said no one should expect major staffing changes. “The management structure looks much like our existing resorts,” he said. “We’ve said that we expect to retain the vast majority of employees at all the resorts we recently purchased.”

“Our employees have done so much good work over the last several years to make CBMR a success. We want to see them continue to do it. With this move they will have more resources and that is exciting,” said Erica.

Retaining community

“As part of the decision process we contemplated whether this would be good for the community,” said Ethan. “We recognized it would be a big shift. And quite frankly, we do think it will be a good fit. For people who think there will be a million skier visits, there won’t be. There’s a natural infrastructure governor (such as found in small engines) that won’t let that happen. There are only so many rooms for example, and this isn’t a day resort. But we’ve been intent on growing, too. I think they’ll get to our goal, easier. We were fighting the good fight and we were getting ourselves there but it was harder for us. We have been looking at that 500,000 to 600,000 skier-day winter for years. I would expect they will get somewhere in that realm but maybe not in that first year.”

Like the Muellers, Jarnot makes no bones about the desire to see an increase in skier visitations. “We announced that we would spend money [$35 million] out of the gate on improvements at the resorts we purchased. We invest in the guest experience to make it better and we certainly want to attract more people,” he explained. “We expect a return on the investment. That is part of the business strategy. But I don’t understand how that would change Crested Butte.”

When pushed whether the sale from small independent ownership to worldwide corporate conglomerate would intrinsically change Crested Butte to move away from its somewhat rough-around-the-edges reputation toward a more glossy corporate feel, Jarnot said that was the last thing the company would want.

“We already have a Vail and we don’t want to buy another one,” he said. “Crested Butte is so unique and different, with strong individuality. That’s the attraction of Crested Butte that appeals to us. Our perception is that the community as a whole is very distinct in attitude and feel. I’m surprised that people think we could change that or even that we would want to. That is not what we want to do.

“Okemo and Sunapee certainly complement Stowe and the idea of the company having a presence in the Northeast,” he continued. “Our strategy is to offer different resorts and different experiences for our customers. But this deal was not just about the Northeast. We have been aware and have been interested in Crested Butte as a unique and different resort. It is a true destination resort, especially compared to our other Colorado resorts. It is not as much of a regional draw as our other resorts in the state. Our overall business strategy is to provide different experiences for people to choose from. We want to get them to try new places with different feels, and Crested Butte offers that.”

“Vail can’t come in and overnight dictate that we’ll go from 31,000 airline seats to 75,000,” added Ethan. “It just isn’t going to happen. Monarch Pass is still Monarch Pass and some people will be okay driving over it and others won’t be okay. We’re still at the end of the road. And I think those things will largely continue to, as they always have, keep things in check.

“We are not now Vail,” Ethan continued. “CBMR doesn’t define Crested Butte. Crested Butte is what it is because of the people. Vail can’t change that nor do they want to. They’ve been very upfront that they don’t want to homogenize everything, which is what people are afraid of. They recognize their opportunity is to diversify. They know there is a customer out there who wants a Crested Butte and they want a product they can sell that person. That’s their intent. So they want Crested Butte to be Crested Butte, with a few more people to come and see Crested Butte.”

“Vail is a ski company,” added Erica. “That is its roots. They never sell a resort. They want skiing to prosper but keep it unique to what it is. I think they want to keep and celebrate our character. Their decisions here won’t be just something out of Broomfield. It was discussed with them and made our decision more comfortable.”

The new business model came into play

Ethan said that while considering whether to sell, the wave of ski area consolidation was a factor. “One realization we came to with Alterra and Vail is, whether we want it or like it, this is where the business is going. They’ll brand differently but at the end of the day they are similar. It’s been largely driven by consumers. Consumers are making these companies successful and they are asking for these things so we came to that realization.

“Our resort companies have been close to record years lately,” Ethan continued. “There wasn’t any one thing that clicked us into making the decision. Like any big decision, we talked about it a lot. The more we talked, the more obvious the answer became. It initially was a ‘Holy Crap’ moment but over time as we absorbed that and talked through the deal and all the stuff like the employees, the community, the personal stuff that was in the mix, it slowly made more sense.”

Jarnot said it made sense to the corporation as well. “Crested Butte is physically remarkable,” he emphasized. “The combination of the town, the setting, the wide-open spaces, the ski terrain, all add to the mix. The character of the town and the local businesses, the attitude of the locals, it all has a distinct flavor. Over time Crested Butte has developed its own strong personality and that is part of the appeal for some people who want to visit. The destination is distinct and different from other places and that is why it works for us.”

As for season passes, if the acquisition goes through, Vail will honor CBMR passes that have been purchased. Pass details can be found online at www.epicpass.com.

Expansion and housing

The proposed Teo-2 expansion currently going through the U.S. Forest Service review process will continue to do just that. Jarnot said his team has not seen the actual terrain but has looked at maps and photos. “We need to learn more about the expansion plan and what it provides for the guests,” he said. “We will evaluate it all and see what to do if it gets approved by the Forest Service.”

Jarnot said that good employees and their living situation is an important part of any business model. “We have been focused on affordable housing in our other resorts and the types of housing depend on the various resorts. In Breckenridge and Keystone we have significant employee housing that we own or control through master leases. In Park City, we don’t have as much. But it is a concern in every single mountain community in the West. We understand that we need it to operate our business.”

When the deal goes through, it will be Vail that is a new partner in the Brush Creek Memorandum of Understanding (MOU) contract and Vail will have a 25 percent say in the project. “I’ve heard about the Brush Creek proposal but don’t know a lot about it yet,” admitted Jarnot. “We are interested in understanding where CBMR was with it and see if there is opportunity there to create housing for our seasonal employees.”

Coming in, going out

Overall, Jarnot is excited to delve more into the community. “We went into this expecting it would be big news and a surprise, and it was,” he said. “We understand the concern to protect what is valued in the community. We are really excited about acquiring CBMR because it is Crested Butte and it is so individual and has such a strong character. That is what interests us. We have no interest in trying to change that. We have a lot more to learn about Crested Butte and I’ll be back there this summer and look forward to meeting with community members and talking about how we can be part of the community.”

There was some obvious emotion as Erica and Ethan discussed the sale in their office at the base of the Silver Queen.

“This is home for us,” Erica said. “A big part of our hearts is in Crested Butte.”

“It always will be home,” agreed Ethan.

“Like our parents in Okemo, we have developed a lot of good relationships and had a lot of good experiences here,” said Erica. “A lot of emotion came with the decision.”

“If we didn’t have a mostly positive feeling about it we wouldn’t be doing it,” concluded Ethan.